In these troubled economic times it is not unusual for the price of property and real estate to go down. In many cases the amount that is owed by the mortgagor or the borrower on the promissory note is much higher than the real cost of the property. Furthermore if the cost is going to remain lower than the price in the note then the borrower may decide not to make any payments towards the mortgage even if he or she has the finances to do so.

• Thus when a mortgagor has the finances to pay for the mortgage but decides not to do so because of the financial unfeasibility then it is called strategic default. In such cases usually the mortgagor can stay in the house, sometimes, even for months or years till foreclosure.
• Generally in strategic default cases the mortgagee or the lender will give more than the minimum stipulated time for the resident to leave the property. Moreover the lender can also pay a fee to the mortgagor to leave the house in an undamaged or pristine condition. This is because the resident is in a mortgage contract that is only benefiting the mortgagee.
• When strategic default occurs it is important to pay off the remaining or outstanding debts on other lines of credit. All credit card payments and behind schedule pending bills ought to be paid off. This is because strategic default can affect a person’s credit rating or credit score since the foreclosure will show up on your credit report.
• Strategic default is not a beneficial choice for both the mortgagor and the mortgagee since the mortgagors end up damaging their credit rating and mortgagees end up with an unfulfilled contract with lower foreclosure proceeds. Therefore it is important to think twice before opting for a strategic default since it can be damaging in the long run.
• Another point to consider is that strategic default can mean that the mortgagor may not be able to receive any loans for three to five years. This will further exacerbate the financial situation of the mortgagor. If you are a mortgagor who thinks that the value of property has dropped considerably then it is important to know whether it will increase in the future.
• If the value of a property is temporarily dropping or has the potential for selling at a higher price in the next five to ten years then strategic default would be financially imprudent for the mortgagor. Therefore it is advisable to take professional advice before choosing strategic default.

If you have any more points or facts about strategic default, please feel free to leave a comment.